Buy to let lending swings back in to favour

Buy to let lending swings back in to favour

15:10 PM, 21st April 2011, About 13 years ago 8

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The buy to let mortgage market has seen a wind change in recent weeks and lenders loosening their purse strings with higher loan to values and better rates for property investors.

Market watchers can sense a change in mood from banks and building societies as buy to let picks up. The main damage to the housing market has been the demise of the first time buyer.

With indeterminate job prospects, little savings and often chequered credit histories, the number of first time buyers who can afford to purchase a home has dropped away.

Buy to let landlords are a completely different market; they are older, have an established credit profile over decades rather than a few years, and more importantly, they have cash to pile in to a loan to reduce the risk for lenders.

This viewpoint is not a wild, unsupported assumption because the evidence for buy to let is stacking up:

  • More buy to let lenders are coming to the market
  • Interest rates are falling on buy to let mortgages
  • Independent studies back the case

For instance, independent financial research firm Datamonitor has issued a report suggesting buy to let is the only sector of the mortgage market that is likely to flourish over the next three or four years.

Another financial firm specialising in property investment, Assetz, has released a study that claims first time buyers are deliberately excluded from lending in favour of property investors.

Stuart Law, chief executive of Assetz, said: “Lenders make no secret that they would rather allocate the limited funds they do have to the lower risk option of buy to let loans, with deposits of 25-40%, than first-time buyers loans with 90% loan to values.

“As a result, the buy to let sector is recovering at a remarkable rate, as investors are drawn back by the need for a long-term, low-risk investment for their cash.

“The buy to let sector has not been as hard hit by the recession as people feared, due to the fact that interest rates have remained extremely low. This has protected landlords by giving them cash flow, and future rate rises, which are likely to be small and gradual, will be covered largely by rental increases.”

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13:18 PM, 30th April 2011, About 13 years ago

The buy to let market at the moment can be a godsend for those who spend there capital wisely as there are some incredible bargains at the lower end of the market.
A recent example I bought a small 1 bed uni flat for £25k refurbed for £5k rented it out for £250 per month and re mortgaged it with the valuation of £40k getting £30k mortgage.
So I have all my investment back £10k value still in the property and £100 per month income after mortgage and maintenance payments.

Mark Alexander - Founder of Property118

13:43 PM, 30th April 2011, About 13 years ago

Well done Ray, I've done a few deals like that myself over the last few years. Most were slightly bigger projects and involved refurbs but the basic principles are the same. May I ask which lender you refinanced with and whether you had to wait six months refinancing? The only lender I've found who will allow refinancing within 6 months is Coutts but they insist on 70% LTV and repayment mortgages over 15 years or TMW on their light refurb scheme (sadly I'm up to my limits with them).

17:04 PM, 30th April 2011, About 13 years ago


you are perfectly right when you say you have to wait for 6 months to re mortgage or in my case just to mortgage having bought for cash.
I know how frustrating it is that even when the property values up because u got a good deal u still cant remortgage for 6 months.

Good question anyone who knows any lenders who dont need the 6 month delay?

kher khulpateea

13:31 PM, 2nd May 2011, About 13 years ago

I have a mortgagge of 205k on a property and the mortgage is on variable rate of 5.75 % with just about 25% equity. TMW has offerred ma a deal of 4.99 I think fixed which should redue my mortgage payment by £125.
However, there is a wooping 7k commission or fee plus the usal legal fees eccetera. My offer is out but i am reluctant to rack up this fee which obviously will be added on to the maorgage.
My thoughts are that it will (a) improve cash flow as the property has not generated any income and is unlikely to generate any for the next few months ( just because what I am dong to it interms of business) (b) I could offset this fee with the future expected in increase value.

Any bright Ideas anyone????

18:25 PM, 2nd May 2011, About 13 years ago

I must be honest I cannot see why you would even consider re mortgage now the £125 saving a month means nothing by the time you have just paid for legal fees and valuations and then another 7k on top.
If I read this right you are refurbing the building so if you waited till after the refurb you could either obtain more cash due to a higher valuation or reduce the mortgage percentage because you would need less than 75% the rates reduce considerably at 60%

18:31 PM, 2nd May 2011, About 13 years ago


Have just received this by e mail the figures look good but have no first hand knowledge of the company For remortgages to 75% loan to value
Interest rate : 3.99% variable being LIBOR (currently 0.9%, variable) plus 3.09% for 2 years
Max 75% loan to value
Reversion rate: Standard Variable Rate (currently 4.6% variable) plus 0.5% to give a current reversion rate of 5.1%
Rental cover required: 125% at 5% nominal rate (max loan approx 191 x monthly rent)
Lender’s arrangement fee : £999 added to loan
Applicant minimum income £40,000
Remortgages in England and Wales. Free valuation and legals.
Interest Only available.
Early repayment charge 5% for 2 years, Nil thereafter.
Overall cost for comparison is 5.2% APR

Alternatively you can fix at 4.99% until 30 June 2013, in which case the overall cost for comparison is 5.3% APR.

There is a limited timescale on this product – loans must complete by 24th June 2011 so please contact me as soon as possible if you are interested.

As well as the Mortgage Trust products mentioned above, ibmco has access to the whole of the market and whatever your circumstances or requirements I’ll be very pleased to hear from you.

Terms and conditions apply
A brokerage fee of up to 1% of the loan amount will be charged on a success only basis .
Any property used as security, which may include your home, may be repossessed if you do not keep up the repayments on the mortgage.

Mark Alexander - Founder of Property118

18:43 PM, 2nd May 2011, About 13 years ago

Agreed Ray, it will take 56 months just to ammortise the lenders £7,000 fee alone! Lenders margins may well weaken substantially over that time-frame and who knows what will happen to property prices by then?

NOTE TO TONY - have you taken professional advice on this? If so, maybe it's time for you to find another adviser? If you were refinancing to raise extra cash to buy an astonishly good property at a bargain price with high rental demands and high yields that would be very different. I would still use our Number crunchers to work out whether I would be better off though.

12:32 PM, 4th May 2011, About 13 years ago

Hi Mark, just for your info - Paragon may consider a refinance within six months at 75%LTV if you're able to provide evidence of improvements to the property.

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